Question

Country A and country B both increase their capital stock by one unit. Output in country A increases by 10 while output in country B increases by 8. Other things the same, diminishing returns implies that country A is _______.a. richer than Country B. If Country A adds another unit of capital, output will increase by more than 12 units.
b. richer than Country B. If Country A adds another unit of capital, output will increase by less than 12 units.
c. poorer than Country B. If Country A adds another unit of capital, output will increase by more than 12 units.
d. poorer than Country B. If Country A adds another unit of capital, output will increase by less than 12 units.

Answer 1

Answer:

The answer is d. poorer than Country B. If Country A adds another unit of capital, output will increase by less than 12 units.

Explanation:

The law of diminishing marginal returns states that, at some point, adding an additional factor of production results in smaller increases in output.